The resignation of one of May's most trusted allies who had helped pacify her deeply divided party, is a blow for May as she navigates the final year of tortuous Brexit negotiations before Britain's exit from the European Union in March 2019.
Green, who voted to stay in the EU, was appointed as first secretary of state just six months ago in a bid to shore up May's premiership in the wake of her disastrous bet on a June snap election which lost her party its majority in parliament.
But Green's future was thrust into doubt when the Sunday Times newspaper reported last month that police in 2008 had found pornography on his office computers in the Houses of Parliament. In response, Green said that the story was untrue.
A review, requested by May and conducted by a senior government official, concluded that Green's statements which suggested he was not aware that indecent material had been found on the computers, were "inaccurate and misleading."
The review, a summary of which was distributed by May's Downing Street office, found that he had breached rules governing the behaviour of ministers.
"I regret that I've been asked to resign from the government following breaches of the Ministerial Code, for which I apologise," Green said in a letter to May, who said she had accepted his resignation with deep regret.
Green, 61, added that he did not download or view pornography on his parliamentary computers. He said that he should have been clearer about his statements after the story broke.
He is May's third cabinet minister to resign in recent weeks after May's defence secretary quit in November citing past conduct that fell below the required standards.
May's aid minister resigned a week later after admitting to holding undisclosed meetings with Israeli officials.
During the turmoil which followed May's botched election, she turned to Green - a friend and ally from their days at Oxford - to stabilise her premiership and appease those within the Conservative Party who wanted her to quit.
"Its another blow for May but it is not deadly in any way at all," said Anand Menon, professor of European politics at King's College London. "She has lost her soul mate in cabinet but this is not the end of Prime Minister May."
"May is surviving not because of Damian Green but because there are sufficient MPs in her party who don't want to have a leadership election while Brexit is going on and that fundamental calculation has not changed," he said.
The internal investigation found that his conduct as a minister was generally "professional and proper" but found two statements made by Green on Nov. 4 and 11 to be inaccurate and misleading.
In the statements he had suggested he was not aware that indecent material was found on parliamentary computers in his office.
"These statements ... constitute breaches of the Ministerial Code. Mr Green accepts this," the report summary said.
It also addressed allegations, made by the daughter of a family friend, that Green had made an unwanted advance towards her during a social meeting in 2015, had suggested that this might further her career, and later had sent her an inappropriate text message.
The report said it was not possible to reach a definitive conclusion on the appropriateness of Green's behaviour in this instance, though the investigation found allegations to be plausible.
Green said in his resignation letter that he did not recognise the account of events, but apologised to the woman, academic and critic Kate Maltby, for making her feel uncomfortable.
(Writing by Guy Faulconbridge; editing by Kate Holton and Susan Thomas)
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